Top 3 Metrics to Financial Freedom

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These are the top 3 metrics you need to track to set yourself on the path to financial freedom.

To start your journey towards financial freedom you’ll need to understand where you are at and where you are going.  This used to be a more painful process, but thanks to technology, there are now much easier (and free) tools to track the top 3 financial metrics to not only get you started but to keep the momentum going on your path to financial freedom.  I’ll share my recommendation on the best free tool to use.

Monthly Income

Let’s start with what is likely to be the easiest metric to track, monthly income.  This is usually the easiest to start with because most people are paid only a few times a month.  The intent here is to add up all money that is coming into your bank account during a calendar month, or your take-home pay.  If you make $60k a year, that equates to about $5k a month, but that is a before taxes and other payroll withholding amount.  What you want to track is your take-home pay, which is what actually enters your bank account and pays the bills.  This is going to be a considerably lower number than the $5k gross income previously mentioned.

Monthly Spending

This one is a little more difficult but is easier with a free tool like Personal Capital, but now we are on to tracking monthly spending.  We need to track all monthly spend, whether it’s on a credit card, or you withdraw cash or write a check, we want to understand the total outflows of money for the month.  When you add up all the ways you spend money you may be surprised at how much you spend on groceries or going out to eat.

Net Worth

This measure is your personal balance sheet.  Which means that it adds up everything you own, house, cars, bank account balances, 401k, investments, etc. and subtracts out the debts that you owe, mortgage, credit cards, student loans, auto loans, etc..  What is left is your personal net worth, or the amount that you’d have if you sold everything you own and paid off all your debts.  While I listed it last of the 3, this metric is the benchmark that will show you how well you are doing on your path to financial freedom.  As you continue to make progress this balance will continue to grow which provides motivation to keep going.

The easiest way to track your personal net worth is through a free online service like Personal Capital, which is what I use.  Everything is tracked over time so you can see your progress. Try it for yourself by clicking here.

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GP

Hi, I'm GP. A personal finance expert with a mission to help Entirely Money readers break free of money worries. Combining a finance-focused education background (B.S. in Finance and MBA with Finance focus) with over 15 years of personal and corporate finance experience to help you achieve your financial best life!

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